Intel eyes set-top computers

PALM SPRINGS, California--Intel will start to place chips in set-top boxes later this year and come out with enhanced Pentium II and Xeon processors by the second half of 1999, according to company executives.

The multifaceted development effort reflects the company's never-ending quest to expand its market share.

Intel's new StrongARM chip architecture, acquired from Digital Equipment, will make Intel a player in handheld and TV set-top computers, said Craig Barrett, Intel's CEO and president, speaking at the Intel Developer Forum here.

These are two markets where it has no real presence but which could turn into huge markets in the future.

"The StrongARM is complementary to the Intel architecture. It is great for handheld devices, great for set-top boxes, great for [other] devices," Barrett said. "You can expect to see new [StrongARM] architectures roll out on a biannual basis." Intel's other chips also get an architectural refreshing every two years.

StrongARM is not based on Intel?s x86 architecture--which is used in more than 90 percent of PCs today--but a new low power, RISC (reduced instruction set computing) design.

The first set-top boxes powered by StrongARM processors will appear later this year, added Barrett. Handheld devices running Windows CE and based on the StrongARM chip will also come out in 1999, said other sources. This chip will likely start to show up in servers as specialized processors, he noted.

At the same time, new markets increase development complexity for the company. Indeed, market segmentation--the reigning mantra at Intel--comes as both an opportunity and a curse, according to executives.

"The computer industry as a whole is increasingly segmented into different classes of computers," Barrett said. "It just multiplies the complexity for all of us."

With its commitment to StrongARM, Intel will be coming to market with five families of microprocessors: a Xeon line for servers; the Pentium II line for performance PCs; the Celeron line for basic PCs; a mobile Pentium II line; and StrongARM. By mid-2000, the picture expands again with the release of Merced, the 64-bit processor for high-end computing systems.

Intel in 1999: What to expect

Xeon: 700-MHz chips made under the 0.18 micron process.

Pentium II: 600-MHz chips by end of year. Katmai ("MMX 2") technology in Q1. Chips with 256K integrated cache memory will appear in the first half, before coming in the Celeron line.

To resolve this issue, Barrett said that Intel will call upon the hardware and software industries to hammer out technological standards to make bringing products to market easier. Intel will also continue to invest in research and development

Intel, he added, is also committed to making each of these product lines easier to use, with enhancements such as speech recognition, richer 3D graphics, and vastly improved security for electronic commerce. PC support costs, he added, should be decreased by 30 percent per year going forward.

Also, the pace of technological advancement is accelerating. In the past,
it took Intel roughly three years to move from one generation of
manufacturing technology to the next. Now, Intel will graduate from the
0.25-micron manufacturing process to the succeeding 0.18-micron process in
two years.

Barrett and Albert Yu, vice president of microprocessors at Intel, laid out Intel's microprocessor road map through 1999 and beyond. While there were few surprises, the executives provided a number of details that previously were not officially confirmed.

For performance PCs, Intel will release a new generation of chips called
Katmai in early 1999. The Katmai Pentium II chips will come with 70 new
processor instructions that will enhance 3D performance and video playback.
"The idea of the Katmai New Instructions is very similar in nature to what
we did with MMX," said Yu.

The first Katmai chips will run at 450-MHz and 500-MHz and be made on the
0.25-micron manufacturing process.

By the second half, Intel will roll out "Coppermine,"
a Katmai chip manufactured on the more advanced 0.18-micron process that
will also contain integrated cache memory similar to the recently released, "improved" Celeron processors.

The Coppermine chips will contain 256K of secondary
cache, according to sources. Speeds will range up to 600-MHz and beyond, said sources. These chips will also come in the Organic Land Grid Array (OLGA) packaging, which allows for better connectivity.

For Basic PCs, Intel will boost the speed of Celeron to 366-MHz in the
first half of 1999, said Yu. Sources said that will expand to 400-MHz in
the second half. At that point, Celeron processors will also graduate from
the older 66-MHz bus--or data path--to the 100-MHz bus currently used by more advanced Pentium II chips.

Servers and workstations will see the appearance of a 450-MHz Xeon
processor in the near future while a 500-MHz Katmai chip will appear in
the first half of 1999. While the first 450-MHz chips will only be used in
one- and two-processor configurations, servers using four Xeons at once at
450-MHz and beyond will appear in the first part of 1999.

In the second half, "Cascades" will come out. Like Coppermine, this will be
a Katmai chip made on the 0.18-micron process with integrated cache memory,
said Yu. Intel will likely include 512K of on-cache memory on this chip.

For mobile computers, Intel will release a 333-MHz Pentium II in the first
half. Sources say this will include 256K of integrated cache memory. Intel
will also begin to release Celeron processors for the mobile segment.

Merced is on track for a mid-2000 release, both Barrett and Yu added. Yu,
however, added for the first time that there is a successor to Merced
called McKinley that will come out in the second half of 2001, just a year
after Merced ,that will provide "twice the performance" of Merced.

"It [McKinley] will be in production in the second half of 2001," he said.

Analysts have said the existence of the successor at a period so close in
time could hurt Merced's chances as a viable product. Still, the rapid pace
of a change is becoming a fact of life. Designs on a third generation are under way
and it will appear in 2002 or later. In addition, the next-generation of 32-bit processors will come out in the same time frame as McKinley and the third generation.

The diversification of the product line has also made some analysts
speculate that Intel will impose more job cuts than the 3,000 announced
earlier this year. Barrett, however, indicated that no further cuts were
slated. Intel may not hire more people, but further reductions at the
present do not seem to be required. "What we would like to do is to continue to grow without doing a head count cut," he said, adding, "We did a lot of hiring in the past two years."

Barrett also added that Intel is still fighting its lawsuit with the Federal Trade Commission and that not much
has changed. There is little disagreement on the facts. The disagreement
comes in the interpretation of the facts under the law. The FTC maintains
that Intel violated antitrust law by breaking off development arrangements
with third party computer vendors as a way to bargain intellectual property
out of the computer vendors.

Barrett also added that Intel is not exercising monopoly power.

"We've had quarters of flat revenue and earnings," he said. "We're a pretty
crummy monopoly."